The Role of Parental Wealth and Income in Financing Children's College Attendance and Its Consequences
This paper examines the influence of parental wealth and income on children's college attendance and parental financing decisions, graduation, and quality of college attended, and whether parental financing affects the subsequent indebtedness of parents and children. We find that higher levels of parents' wealth and income increase the likelihood that children attend college with financial support relative to not attending college, and that parental wealth increases the likelihood that children graduate from college. We show descriptive evidence that parental support for college increases the subsequent level of housing debt that parents hold but does not reduce student debt for children.
This research and the Roster and Transfers Module in the 2013 Wave of the PSID were funded by grant P01AG029409 from the National Institute on Aging. We thank Joe Altonji, Breno Braga, Rajashri Chakrabarti, Jim Heckman, Arnaud Maurel, Adam Kapor, Lance Lochner, participants in seminars at Brown, University of Western Ontario and UCLA, and those at 2016 Population Association of America and Society of Labor Economists Meetings and the PSID Conference on “New Directions in Study of Intergenerational Transfers,” the HCEO Conference on “Human Capital Formation and Family Economics,” the New York Fed Bank Conference on “Higher Education Financing & Costs and Returns of Higher Education,” and the 2017 Southern Economics Association Meetings for comments on earlier drafts of this paper. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.